In today’s expensive housing market, you’re probably curious whether it’s better to rent or buy a house. It’s often less expensive to rent in the short term, but homeownership isn’t just about your monthly finances — it’s also about what sort of lifestyle you want now and in the future.
Buying a house makes sense if you’re ready for the long-term commitment and have enough financial stability to support homeownership. Still, renting may be the better choice if you move frequently, or if you’re just not ready to take on home maintenance and repair duties.
In general, you should rent a home if you prefer flexibility, or if you need more time to establish healthy credit scores, job stability and savings. Most first-time homebuyers need a mortgage to buy a home, which typically requires at least a 500 to 620 credit score, at least a 3% down payment and two years’ worth of consistent job history.
Buying can be the better choice if you’ve built up savings, managed your credit well and hold a stable job with consistent income. Homeownership also comes with the added benefit of building home equity, which can help you accrue wealth in the long run. But you’re taking on more than just an asset — you’ll need to prepare for ongoing home maintenance and repairs, which can take both a financial and physical toll.
Key differences between buying vs. renting a home
Buying | vs. | Renting |
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Buying a home is likely one of the largest investments you'll ever make in your future. It's also a huge part of most people's vision of "The American Dream." It's far from a slam dunk, though. If you're not ready for it, a dream home can quickly turn into a nightmare. | Don't fall for the myth that you're "throwing away money" by renting. Most people have to pay for shelter — it's just part of being a modern American. However, renting can feel less stable and rooted than owning a home. |
Here are the key differences you should consider when deciding whether to rent or buy:
Stability and autonomy. One of the primary draws of homeownership is that you won’t have to worry about rent increases or whether a landlord might sell the house. You can paint the walls, update the flooring or add landscaping without needing anyone’s permission. But if it’s flexibility you crave, the ability to pack up and move at the end of your lease might be the better option.
Economic benefits. Unlike renting, owning a home is an investment. Every mortgage payment you make builds home equity, which can provide many future benefits:
- You reap the benefits of home price increases, which typically happen over time. If your home value goes up, you’ll gain equity without having to do a thing. When your mortgage is finally paid off, you can sell the home for a profit or pass it on to your relatives.
- You have access to more credit options. Loans that use your home equity as collateral usually come with flexibility and lower interest rates. They allow you to consolidate debt or pay for major milestones, like a new business venture or college tuition.
Renting can take far less of a toll on your cash flow, however. Your monthly expenses will be lower and you won’t have to come up with a down payment. This potentially frees up cash that you can put to work in investments or business ventures.
Tax benefits. If you itemize your tax deductions, you can write off home mortgage interest and any state or local property taxes. Keep in mind that over time the amount of mortgage interest you pay goes down, so the benefit you’ll reap from the interest deduction will also go down. The interest on equity-tapping loans like home equity loans and home equity lines of credit (HELOCs) may also be deductible, but only if you use the money for home improvements.
Upkeep responsibilities and costs. Owning a home means owning all the responsibilities that go along with it, including home maintenance and repairs. But it’s not just a matter of handyman prowess — every repair will cost you. Experts suggest budgeting at least 1% to 4% of your home’s value each year to cover these costs. On a median-priced home today, that can range from $4,310 to $17,240 a year or up to $1,437 extra per month.Renters, on the other hand, get to enjoy the stability of paying only for rent and utilities each month. When necessary repairs or maintenance pop up, they don’t have to worry about how those expenses will affect their budget.
Roots vs. flexibility. People often buy homes because they want to be a part of a local community, with neighbors that become friends and kids that grow up together in nearby schools. In fact, the typical homeowner intends to spend a 15-year median in their home, according to data from the National Association of Realtors (NAR). And although in theory you can sell a home and move at any time, in practice it’s a hassle and a large expense. People who move frequently might benefit more from the flexibility of renting — it’s easier to break a lease than sell a house. The same goes for those who might want the freedom to easily downsize (or scale up) their living expenses as needed.
Benefits and drawbacks of buying a home
| Pros | Cons |
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Security. You own your shelter, so no one can force you to move if you don't want to. Customization. You can renovate, decorate and enjoy the home as you wish. Tax benefits. You might qualify for one of the many tax breaks and credits for homeowners, which essentially reduce your housing costs. Equity. Your mortgage payments build equity, which can offer significant financial benefits down the line, like greater access to credit. | Added responsibility. You're now in charge of maintaining and repairing the house. Unpredictable costs. Your mortgage payment may remain steady, but the cost of repairs and other homeowner expenses can be hard to predict and budget for. High upfront costs. You’ll usually need access to a lot of cash to get into a home. Falling values. You could lose money if house prices fall. Less flexibility. You won’t find it as easy to move or embark on long-term travel. |
Not surewhat your monthly mortgage payment could be? Get an estimate today using our mortgage calculator.
Benefits and drawbacks of renting a home
| Pros | Cons |
|---|---|
More flexibility. You can easily move elsewhere when the lease ends. Less responsibility. Your landlord handles repairs and maintenance. Limited financial complexity. You won’t lose money if house prices fall or a neighbor does something that lowers the home’s property value. | Less security. Your landlord could raise the rent or sell the property. Limited ability to customize. You need the landlord's permission to make updates to the home. No future benefits. Your payments build your landlord’s equity; you come away with no additional benefits. |
Looking for an alternative option to home ownership? Learn more about rent-to-own homes and how they work.
Is renting cheaper than buying?
On a per-month basis, renting tends to be cheaper than buying — at least it has been in recent years, according to a LendingTree study.
The average monthly cost for homebuyers applying for a new mortgage was $1,844 in 2022, according to data compiled by the Mortgage Bankers Association. The median rent price was about $1,300 for the same time period, according to data from the U.S. Census Bureau. This monthly difference would free up $6,528 per year that you could save for other financial goals.
However, buying a home means building home equity, which can help you grow your wealth over time. Renting doesn’t offer those future benefits, although its lower cost can leave room in your budget for other forms of investing. If you’d like to crunch some numbers tailored to your situation, you can use a rent vs. buy calculator to compare specific buying and renting scenarios.
Think buying a house could be the right option for you? Compare current mortgage rates today.
| Buying a home makes sense if: | Renting a home make sense if: |
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